The Treasury Update Podcast Creating and Maintaining an Effective Investment Policy
Aug 26, 2025
Paul Galloway, a Senior Advisor at Strategic Treasurer and an expert in treasury and financial matters, delves into the essentials of effective investment policy. He discusses the importance of risk management and diversification in portfolio strategies. Galloway emphasizes the significance of governance and contingency planning while navigating market risks. Additionally, he highlights the critical role of reporting and performance assessment in maintaining compliance and ensuring resilience in investment decisions.
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Policy As Guide Rails
- Investment policies act as guide rails that define objectives, risk tolerance, liquidity needs, and diversification constraints.
- They allow portfolio managers to operate within clear boundaries while pursuing target returns.
Specify Objectives And Benchmarks
- Define clear investment objectives including target return, risk profile, and liquidity requirements.
- Specify benchmarks and reporting cadence to measure performance and provide forward-looking market context.
Diversification Lowers Risk Relative To Return
- Diversification reduces portfolio risk while preserving return on a risk-adjusted basis.
- Asset allocation limits protect against concentration in credit, industry, or single-name exposures.